SHANGHAI, Jan 17 (SMM) – Shanghai base metals mostly closed lower in the overnight trading last Friday, and their counterparts on LME closed mixed.
LME copper fell 2.32%, aluminium rose 0.32%, lead increased 1.04%, and zinc dropped 0.7%.
SHFE copper dropped 2.04%, aluminium fell 1.06%, lead rose 0.29%, zinc fell 1.34%, and nickel lost 0.48%.
Copper: Three-month LME copper opened at $9,935/mt last Friday, and fell to the lowest point at $9,698.5/mt, then rebounded to close at $9,731.5/mt, down 2.32%. The trading volume was 15,000 lots, and the open interest was 249,000 lots. Three-month LME copper is expected to trade between $9,680-9,780/mt today,
The SHFE 2203 copper contract opened at 71,200 yuan/mt last Friday night, and fell to the lowest point at 69,950 yuan/mt, before closing at 70,090 yuan/mt, down 2.04%. The trading volume was 58,000 lots, and the open interest was 132,000 lots. SHFE copper is expected to trade between 69,700-70,300 yuan/mt today, with spot prices between a discount of 100 yuan/mt and a premium of 80 yuan/mt.
On the macro front, the US retail sales registered a largest drop in 10 months in December, and the US consumer confidence index in January approached a 10-year low, indicating that the consumption was suppressed under high inflation. The New York Fed president said the Fed is getting closer to a decision to gradually raise interest rates. The US stocks fell sharply amid concerns over interest hikes, the US dollar index rebounded on Friday, and copper futures fell sharply. In the spot market, the participants were wait-and-see in the morning last Friday as the prices fluctuated at high levels. Then as the price spread between the contracts narrowed, the transactions picked up.
Aluminium: LME aluminium opened at $2,977/mt last Friday and closed at $2,987/mt, an increase of $9.5/mt or 0.32%.
During last Friday’s night session, the most-traded SHFE aluminium contract opened at 21,230 yuan/mt, with the highest and lowest prices at 21,260 yuan/mt and 20,870 yuan/mt before closing at 21,005 yuan/mt, down 225 yuan/mt or 1.06%.
The operating aluminium capacity in Yunnan and Shanxi may increase slightly. On the demand side, the operating rates of aluminium processing enterprises declined with the approaching of the Spring Festival, hence the social inventory may begin to grow this week. The market needs to pay attention to the reduction of aluminium production caused by the energy shortage in Europe, and the possible aluminium price correction caused by profit taking by longs.
Lead: Three-month LME lead opened at $2,353/mt last Friday, hitting the highest price at $2,380.5/mt and then fell to close at $2,374.5/mt, up 1.04%.
The most-liquid SHFE 2203 lead contract opened at 15,750 yuan/mt last night, hitting the highest level at 15,755 yuan/mt, and closed at 15,660 yuan/mt with limited fundamentals support approaching the Chinese New Year, an increase of 0.29%. The trading volume rose 7,839 lots to 44,662 lots.
Zinc: LME zinc opened at $3,548/mt last Friday, and hit a high of $3,598/mt before falling back to $3,504/mt, and closed at $3,535.5/mt, a decrease of $25/mt or 0.7%. The trading volume rose to 8,546 lots, and open interest added 3,175 lots to 257,000 lots. LME zinc inventory decreased by 1,275 mt to 183,675 mt, a drop of 0.69%. The US dollar index rebounded, which will put pressure on zinc prices. The European energy issues will remain the market focus. LME zinc is expected to move between $3,510-3,560/mt on Monday.
During last Friday’s night session, the most-traded SHFE 2203 zinc contract fell to 24,480 yuan/mt after opening at 24,960 yuan/mt, but then rallied before closing at 24,615 yuan/mt, down 335 yuan/mt or 1.34%. Trading volume was 74,084 lots, and open interest decreased by 440 lots to 93,783 lots. On the supply side, some smelters reduced production due to environmental protection factor and tight zinc ore supply. Some smelters in Hunan have undergone overhauls that exceed the normal time in the past. The domestic refined zinc output in January is estimated to fall to 513,400 mt. On the demand side, the overall zinc downstream operating rates fell due to the pandemic and closures for the CNY in advance. The supply side will offer strong support to zinc prices, which are unlikely to fall sharply in the short term. The most-traded SHFE zinc contract is expected to move within a range of 24,500-25,000 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 150-170 yuan/mt over the SHFE 2202 zinc contract.
Nickel: The SHFE 2022 nickel contract closed at 163,250 yuan/mt last Friday evening, down 780 yuan/mt or 0.48%. Trading volume decreased 113,000 lots to 275,000 lots, and open interest decreased by 22,000 lots to 145,000 lots. The nickel prices continued its strong momentum last week as the logic driving pure nickel prices has not changed fundamentally. The social inventory of pure nickel and the inventory in the bonded area continued to decline last week. The market’s expectations over concentrated arriving shipments still failed to materialise. The open interest of SHFE nickel continued to increase. This week, it is expected that the arrival of pure nickel in the market will still be limited, and it is estimated the inventory will not increase significantly. It is possible that the situation of low inventory and sustaining high premiums be unchanged. From other perspectives on the fundamentals, downstream stainless steel and nickel sulphate enterprises were still actively stocking up before the CNY holiday. And the fundamentals are unlikely to weaken too much in the short term. Two potential factors may weaken the pure nickel prices in the short term, including a potentially earlier interest rate hike by the Fed, which will depress the market’s risk appetite. The other factor is when the arriving shipments of pure nickel exceed market expectations. The nickel prices are expected to hover at highs this week.
Tin: During last Friday’s night session, the SHFE 2202 tin dropped to around 303,000 yuan/mt. SHFE tin is likely to fall with the inflows of deliverable brands products into the spot market. The domestic tin inventory under SHFE warrants increased significantly. It is expected that the deliverable brand products will gradually enter the market this week.
